Prevention costs are investments made ahead of time in an effort to ensure conformance to requirements.Examples include activities such as orientation of team members, training, and the development of project standards and procedures.

Appraisal Costs

Appraisal costs are costs incurred to identify defects after the fact.Examples include activities such as walk-throughs and testing.

Internal Error Costs

Internal error costs are the costs of rework and repair before delivery to a customer.An example is fixing faults detected during internal testing.

External Error Costs

External error costs are the costs of rework and repair after delivery to a customer.One example would be rework and repair resulting from acceptance testing.Another example would be the actual costs incurred during warranty support.

Value-Added

Value-added refers to the basic costs of producing the product or performing the service, exclusive of any additional effort to ensure quality.Value-added effort includes any activities and tasks that modify or convert data from a "raw" state to a useful one, from the customer's viewpoint.It is effort that the customer values and is "visibly" paying for, such as the effort expended to create project deliverables.The cost of value-added activities is not a cost of quality.

Discussion

Prevention costs and appraisal costs are costs of ensuring that the product conforms to its original specifications and is fit for its intended use.Internal error costs and external error costs are the costs of correcting the problems detected.The objective in analyzing cost of quality is to minimize the overall cost by finding the optimum level of prevention and appraisal costs that minimizes internal and external error costs.

Whether a task is considered a cost of quality or a cost of doing business (i.e., value-added) is sometimes a matter of perspective - there is not always a "correct answer."For these reasons, it is important that all Cost of Quality reporting is handled consistently in accordance with the Guidelines for Cost Of Quality Reporting.

For testing it adds to appraisal cost. Typically this is can be reduced only by increasing the prevention cost of factoring this in the design, so that there is no need to test. This is like an aircraft which has prevention cost inbuilt as far as safety is the main aspect. You cannot stop an aircraft for testing inbetween rather it has to be designed as part of the design solution.

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